PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding, whilst the principal activities of the Group, comprising the Company and its subsidiaries, are the provision of mobile, fixed line and international gateway telecommunications services as well as Internet and broadband services, and corporate support functions for the Group. Details of the principal activities of the subsidiaries are shown in Note 18 to the financial statements.
There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year.
FINANCIAL RESULTS
Group RM’000
Company RM’000
Profit for the financial year attributable to:
- equity holders of the Company 1,717,442 1,620,899
- non-controlling interest 7,382
-Profit for the financial year 1,724,824 1,620,899
DIVIDENDS
The dividends on ordinary shares paid by the Company since the end of the previous financial year were as follows:
RM’000
In respect of the financial year ended 31 December 2013:
(a) Fourth interim single-tier tax-exempt dividend of 8.0 sen per ordinary share
on 7,504,853,100 ordinary shares of RM0.10 each, paid on 8 April 2014 600,388
(b) Final single-tier tax-exempt dividend of 8.0 sen per ordinary share
on 7,505,664,800 ordinary shares of RM0.10 each, paid on 27 June 2014 600,453 1,200,841
In respect of the financial year ended 31 December 2014:
(a) First interim single-tier tax-exempt dividend of 8.0 sen per ordinary share
on 7,505,664,800 ordinary shares of RM0.10 each, paid on 27 June 2014 600,453
(b) Second interim single-tier tax-exempt dividend of 8.0 sen per ordinary share
on 7,506,109,800 ordinary shares of RM0.10 each, paid on 26 September 2014 600,489
Subsequent to the financial year, on 6 February 2015, the Directors declared a fourth interim single-tier tax-exempt dividend of 8.0 sen per ordinary share in respect of the financial year ended 31 December 2014 which will be paid on 27 March 2015. The financial statements for the financial year ended 31 December 2014 do not reflect these dividends. Upon declaration, the cash dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending 31 December 2015.
The Directors recommend the payment of a final single-tier tax-exempt dividend of 8.0 sen per ordinary share in respect of the financial year ended 31 December 2014, which is subject to shareholders’ approval at the forthcoming Annual General Meeting, and will be paid on a date to be determined.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial year have been disclosed in the financial statements.
SHARE CAPITAL
During the financial year, the issued and paid-up share capital of the Company was increased from 7,503,454,800 ordinary shares of RM0.10 each to 7,506,580,900 ordinary shares of RM0.10 each by the issuance of 3,126,100 new ordinary shares for cash pursuant to the exercise of share options under the Employee Share Option Scheme (“ESOS”). The detail of the new ordinary shares issued during the financial year is as follows:
Exercise price per share
Number of issued and paid-up ordinary shares of RM0.10 each ’000
RM5.45 1,661
RM6.41 1,355
RM6.78 110
3,126
These new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.
EMPLOYEE SHARE OPTION SCHEME
Pursuant to the ESOS implemented on 17 September 2009, the Company will make available new shares, not exceeding in aggregate 250,000,000 shares during the existence of the ESOS, to be issued under the share options granted. The ESOS is for the benefit of eligible employees and eligible directors (executive and non-executive) of the Group and of the Company. The ESOS is for a period of 10 years and is governed by the ESOS Bye-Laws as set out in the Company’s Prospectus dated 28 October 2009 issued in relation to its initial public offering.
An ESOS Committee comprising Directors of the Company has been set up to administer the ESOS. The ESOS Committee may from time to time, offer share options to eligible employees and eligible directors of the Group and of the Company to subscribe for new ordinary shares of RM0.10 each in the Company.
Details of the ESOS are disclosed in Note 31(b) to the financial statements.
During the financial year, there were no new share options under the ESOS granted to the employees of the Group and the Company. The movements of the total share options issued under the ESOS are as follows:
Quantity ’000
Total outstanding as at 1 January 2014 38,588
Total granted
-Total exercised (3,126)
Total forfeited/lapsed (1,603)
Total outstanding as at 31 December 2014 33,859
An analysis of the percentage of share options granted to key management personnel including directors is as follows:
Aggregate maximum allocation Actual allocation(1) Since 17.9.2009 Financial year 31.12.2014 Since 17.9.2009 Financial year 31.12.2014
Key management personnel 50% 50% 15.5%
-Note:
(1) The Directors and Chief Executive Officer of the Company have not, since the implementation of the ESOS, been granted any share
The Directors who have held office during the period since the date of the last report are as follows:
Non-Executive Directors
Raja Tan Sri Dato’ Seri Arshad bin Raja Tun Uda Robert William Boyle
Tan Sri Mokhzani bin Mahathir Augustus Ralph Marshall Alvin Michael Hew Thai Kheam Dr. Ibrahim Abdulrahman H. Kadi Krishnan Ravi Kumar
Hamidah Naziadin
Fraser Mark Curley (appointed with effect from 8 May 2014) Lim Ghee Keong (appointed with effect from 8 May 2014)
Dr. Fahad Hussain S. Mushayt (resigned with effect from 7 May 2014) Chan Chee Beng (retired with effect from 7 May 2014)
Executive Director
Morten Lundal
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than those arising from an incentive arrangement, the details of which are disclosed in Note 3 on Directors’ Interests below.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than remuneration received or due and receivable by the Directors as shown in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he/she is a member, or with a company in which he/she has a substantial financial interest.
According to the Register of Directors’ shareholdings, particulars of interests of the Directors who held office at the end of the financial year in shares in the Company are as follows:
Number of ordinary shares of RM0.10 each in the Company As at
1.1.2014 Acquired Sold
As at 31.12.2014
Raja Tan Sri Dato’ Seri Arshad bin Raja Tun Uda 750,000(1) - - 750,000(1)
Robert William Boyle 100,000 - - 100,000
Tan Sri Mokhzani bin Mahathir 751,000(2) - - 751,000(2)
Augustus Ralph Marshall 750,000(1) - - 750,000(1)
Morten Lundal - 687,175(3) - 687,175(3)
Notes:
(1) Held through a nominee, namely CIMSEC Nominees (Tempatan) Sdn. Bhd.
(2) Includes deemed interest in 1,000 shares in the Company held by spouse pursuant to Section 134(12)(c) of the Companies Act,
1965.
(3) These shares are currently held by CIMB Commerce Trustee Berhad or its nominee pursuant to the terms and conditions of the
incentive arrangement which forms part of the employment contract the Director has entered into with the Company, where the cash incentives payable to the Director were used to acquire shares from the open market and subject thereto, will vest in the Director on a deferred basis, in accordance with the terms and conditions of the said incentive arrangement. In addition to his interest in these shares, the Director is also deemed interested in such additional number of shares in the Company which shall only be determinable in the future, to be acquired using future cash incentives payable to the director, pursuant to the terms and conditions of such incentive arrangement.
Other than those disclosed above, according to the Register of Directors’ shareholdings, none of the Directors in office at the end of the financial year held any interest in shares and options over shares in the Company and its related corporations during the financial year.
IMMEDIATE HOLDING, INTERMEDIATE HOLDING, PENULTIMATE HOLDING AND ULTIMATE HOLDING COMPANIES
The Directors regard BGSM Equity Holdings Sdn. Bhd. as the immediate holding company, BGSM Management Sdn. Bhd. as the intermediate holding company, Maxis Communications Berhad as the penultimate holding company and Binariang GSM Sdn. Bhd. as the ultimate holding company. All these companies are incorporated and domiciled in Malaysia.
Before the statements of profit or loss, statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for impairment and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for impairment; and
(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.
At the date of this Report, the Directors are not aware of any circumstances:
(a) which would render the amounts written off for bad debts or the amount of the allowance for impairment in the financial statements of the Group and of the Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of 12 months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or of the Company to meet their obligations when they fall due.
At the date of this Report, there does not exist:
(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.
At the date of this Report, the Directors are not aware of any circumstances not otherwise dealt with in this Report or the financial statements which would render any amount stated in the financial statements misleading.
In the opinion of the Directors:
(a) the results of the Group’s and of the Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this Report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this Report is made.
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution dated 6 February 2015.
RAJA TAN SRI DATO’ SERI ARSHAD BIN RAJA TUN UDA MORTEN LUNDAL
DIRECTOR DIRECTOR
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 Revenue 6 8,388,502 9,084,452 1,985,000 2,079,000
Interconnect expenses, Universal Service Provision
contributions and other direct cost of sales (2,706,965) (3,089,268) -
-Gross profit 5,681,537 5,995,184 1,985,000 2,079,000
Other income 106,801 62,456 - 2
Administrative expenses (1,702,619) (1,900,483) (12,928) (16,825)
Network operation costs (1,175,175) (1,186,066) -
-Other expenses (95,059) (145,901) (4,732) (5,215)
Profit from operations 7 2,815,485 2,825,190 1,967,340 2,056,962
Finance income 11(a) 44,344 29,361 71,477 66,729
Finance costs 11(b) (423,805) (358,076) (417,328) (354,398) Profit before tax 2,436,024 2,496,475 1,621,489 1,769,293
Tax expenses 12 (711,200) (724,220) (590) (1,142)
Profit for the financial year 1,724,824 1,772,255 1,620,899 1,768,151 Attributable to:
- equity holders of the Company 1,717,442 1,765,462
- non-controlling interest 7,382 6,793
1,724,824 1,772,255 Earnings per share for profit attributable to the
equity holders of the Company:
- basic (sen) 13(a) 22.88 23.53
- diluted (sen) 13(b) 22.88 23.53
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000
Profit for the financial year 1,724,824 1,772,255 1,620,899 1,768,151 Other comprehensive income
Items that will be reclassified subsequently to profit or loss:
- currency translation differences 32(c) 49 (29) -
-- net change in cash flow hedge 32(c) (18,691) 166,944 (18,691) 166,944 Other comprehensive (expense)/ income for the
financial year (18,642) 166,915 (18,691) 166,944
Total comprehensive income for the financial year 1,706,182 1,939,170 1,602,208 1,935,095 Attributable to:
- equity holders of the Company 1,698,800 1,932,377
- non-controlling interest 7,382 6,793
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 ASSETS NON-CURRENT ASSETS
Property, plant and equipment 15 4,008,811 4,038,431 -
-Intangible assets 16 11,176,121 11,166,578 -
-Investments in subsidiaries 17 - - 35,022,142 35,019,383
Loan to a subsidiary 17 - - 1,205,763 1,205,703
Available-for-sale investment 20 50 50 -
-Derivative financial instruments 21 244,452 144,750 244,452 144,750
Deferred tax assets 22 102,045 127,618 -
-TOTAL NON-CURRENT ASSETS 15,531,479 15,477,427 36,472,357 36,369,836
CURRENT ASSETS
Inventories 23 12,440 70,433 -
-Receivables, deposits and prepayments 24 970,453 946,720 1,815 448
Amounts due from subsidiaries 17 - - 81 124
Amounts due from penultimate holding company 25 259 302 - 36
Amounts due from related parties 26 26,584 23,519 -
-Loan to a subsidiary 17 - - - 150,000
Tax recoverable 37,874 3,238 554 238
Cash and cash equivalents 27 1,530,519 807,946 185,960 160,639
TOTAL CURRENT ASSETS 2,578,129 1,852,158 188,410 311,485
TOTAL ASSETS 18,109,608 17,329,585 36,660,767 36,681,321
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 LESS: CURRENT LIABILITIES
Provisions for liabilities and charges 28 65,012 135,473 -
-Payables and accruals 29 3,001,627 2,433,751 893 2,543
Amounts due to subsidiaries 17 - - 1,160 2,616
Amounts due to fellow subsidiaries 25 487 3,648 -
-Amounts due to related parties 26 24,429 23,225 -
-Loan from a related party 26 28,875 - -
-Loans from a subsidiary 17 - - 400,000 400,000
Borrowings 30 879,695 910,103 865,644 903,946
Derivative financial instruments 21 15,848 83,609 15,848 83,609
Taxation 167,275 70,635 -
-TOTAL CURRENT LIABILITIES 4,183,248 3,660,444 1,283,545 1,392,714
NET CURRENT LIABILITIES (1,605,119) (1,808,286) (1,095,135) (1,081,229)
NON-CURRENT LIABILITIES
Provisions for liabilities and charges 28 134,130 109,554 -
-Payables and accruals 29 453,722 371,620 -
-Loan from a related party 26 - 28,875 -
-Borrowings 30 8,118,389 6,613,172 8,106,534 6,601,377
Derivative financial instruments 21 - 33,519 - 33,519
Deferred tax liabilities 22 482,352 495,585 -
-TOTAL NON-CURRENT LIABILITIES 9,188,593 7,652,325 8,106,534 6,634,896
NET ASSETS 4,737,767 6,016,816 27,270,688 28,653,711
EQUITY
Share capital 31 750,658 750,345 750,658 750,345
Reserves 32 3,964,747 5,251,491 26,520,030 27,903,366
Equity attributable to equity holders of the Company 4,715,405 6,001,836 27,270,688 28,653,711
Non-controlling interest 22,362 14,980 -
ordinary shares of RM0.10 each Share premium RM’000 Merger relief (Note 32(a)) RM’000 Reserve arising from reverse acquisition (Note 32(b)) RM’000 Other reserves (Note 32(c)) RM’000 Retained earnings RM’000 Total RM’000 Non-controlling interest RM’000 Total equity RM’000 Group Note Number of shares ’000 Nominal value RM’000 As at 1 January 2014 7,503,455 750,345 20,233 27,758,000 (22,728,901) 120,904 81,255 6,001,836 14,980 6,016,816
Profit for the financial year - - - - - - 1,717,442 1,717,442 7,382 1,724,824
Other comprehensive expense for the financial
year - - - - - (18,642) - (18,642) - (18,642)
Total comprehensive (expense)/ income for the
financial year - - - - - (18,642) 1,717,442 1,698,800 7,382 1,706,182
Dividends for the financial
year ended 2013 14 - - - (625,000) - - (575,841) (1,200,841) - (1,200,841)
Dividends for the financial
year ended 2014 14 - - - (1,801,450) - - - (1,801,450) - (1,801,450)
Employee Share Option Scheme (“ESOS”):
- share-based payment
expense 31(b) - - - - - 2,389 - 2,389 - 2,389
- shares issued 3,126 313 18,779 - - (607) - 18,485 - 18,485
- share options lapsed - - - - - (69) 69 - -
-Incentive arrangement:
- share-based payment
expense 31(c) - - - - - 977 - 977 - 977
- shares acquired - - - - - (4,791) - (4,791) - (4,791)
Total transactions with owners, recognised
directly in equity 3,126 313 18,779 (2,426,450) - (2,101) (575,772) (2,985,231) - (2,985,231)
As at 31 December 2014 7,506,581 750,658 39,012 25,331,550 (22,728,901) 100,161 1,222,925 4,715,405 22,362 4,737,767
ordinary shares of RM0.10 each Share premium RM’000 Merger relief (Note 32(a)) RM’000 Reserve arising from reverse acquisition (Note 32(b)) RM’000 Other reserves (Note 32(c)) RM’000 Retained earnings RM’000 Total RM’000 Non-controlling interest RM’000 Total equity RM’000 Group Note Number of shares ’000 Nominal value RM’000 As at 1 January 2013 7,500,573 750,057 3,199 28,989,000 (22,728,901) (49,662) 85,425 7,049,118 8,187 7,057,305
Profit for the financial year - - - 1,765,462 1,765,462 6,793 1,772,255
Other comprehensive income for the financial
year - - - 166,915 - 166,915 - 166,915
Total comprehensive income
for the financial year - - - 166,915 1,765,462 1,932,377 6,793 1,939,170
Dividends for the financial
year ended 2012 14 - - - (546,000) - - (654,108) (1,200,108) - (1,200,108)
Dividends for the financial
year ended 2013 14 - - - (685,000) - - (1,115,532) (1,800,532) - (1,800,532)
ESOS:
- share-based payment
expense 31(b) - - - 4,353 - 4,353 - 4,353
- shares issued 2,882 288 17,034 - - (694) - 16,628 - 16,628
- share options lapsed - - - (8) 8 - -
-Total transactions with owners, recognised
directly in equity 2,882 288 17,034 (1,231,000) - 3,651 (1,769,632) (2,979,659) - (2,979,659)
RM0.10 each Company Note Number of shares ’000 Nominal value RM’000 Share premium RM’000 Other reserves (Note 32(c)) RM’000 Merger relief (Note 32(a)) RM’000 Retained earnings RM’000 Total equity RM’000 As at 1 January 2014 7,503,455 750,345 20,233 120,953 27,758,000 4,180 28,653,711
Profit for the financial year - - - - - 1,620,899 1,620,899
Other comprehensive expense for the financial
year - - - (18,691) - - (18,691)
Total comprehensive (expense)/income for the
financial year - - - (18,691) - 1,620,899 1,602,208
Dividends for the financial
year ended 2013 14 - - - - (625,000) (575,841) (1,200,841)
Dividends for the financial
year ended 2014 14 - - - - (1,801,450) - (1,801,450)
ESOS:
- share-based payment
expense 31(b) - - - 2,389 - - 2,389
- shares issued 3,126 313 18,779 (607) - - 18,485
- share options lapsed - - - (69) - 69
-Incentive arrangement:
- share-based payment
expense 31(c) - - - 977 - - 977
- shares acquired - - - (4,791) - - (4,791)
Total transactions with owners, recognised
directly in equity 3,126 313 18,779 (2,101) (2,426,450) (575,772) (2,985,231)
As at 31 December 2014 7,506,581 750,658 39,012 100,161 25,331,550 1,049,307 27,270,688
RM0.10 each Company Note Number of shares ’000 Nominal value RM’000 Share premium RM’000 Other reserves (Note 32(c)) RM’000 Merger relief (Note 32(a)) RM’000 Retained earnings RM’000 Total equity RM’000 As at 1 January 2013 7,500,573 750,057 3,199 (49,642) 28,989,000 5,661 29,698,275 Profit for the financial year - - - 1,768,151 1,768,151 Other comprehensive income
for the financial year - - - 166,944 - - 166,944
Total comprehensive income
for the financial year - - - 166,944 - 1,768,151 1,935,095 Dividends for the financial
year ended 2012 14 - - - - (546,000) (654,108) (1,200,108) Dividends for the financial
year ended 2013 14 - - - - (685,000) (1,115,532) (1,800,532) ESOS:
- share-based payment
expense 31(b) - - - 4,353 - - 4,353
- shares issued 2,882 288 17,034 (694) - - 16,628
- share options lapsed - - - (8) - 8
-Total transactions with owners, recognised directly
in equity 2,882 288 17,034 3,651 (1,231,000) (1,769,632) (2,979,659) As at 31 December 2013 7,503,455 750,345 20,233 120,953 27,758,000 4,180 28,653,711
2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the financial year 1,724,824 1,772,255 1,620,899 1,768,151 Adjustments for:
Allowance for:
- impairment of property, plant and equipment - 81,971 - -- impairment of receivables, deposits and prepayments 96,584 109,331 -
-- inventories obsolescence 2,515 20,276 -
-Amortisation of intangible assets 248,417 265,163 -
-Bad debts recovered (17,889) (18,045) -
-Depreciation of property, plant and equipment 1,155,866 1,101,287 -
-Dividend income - - (1,985,000) (2,079,000)
Finance costs 423,805 358,076 417,328 354,398
Finance income (44,344) (29,361) (71,477) (66,729)
Gain on disposal of property, plant and equipment (4,359) (960) -
-Inventories written down 3,871 - -
-Loss on liquidation of a subsidiary 49 - -
-Property, plant and equipment written off, net of adjustment 14,770 37,712 -
-Provision for:
- Career Transition Scheme (“CTS”) costs - 40,712 -
-- contract obligations and legal claims 11,484 64,820 - -- site rectification and decommissioning works 2,660 191 -
-- staff incentive scheme 48,914 38,745 -
-Reversal of allowance for:
- impairment of property, plant and equipment (1,165) - - -- impairment of receivables, deposits and prepayments (24,449) (25,576) -
-- inventories obsolescence (14,620) (19,687) -
-Share-based payments 3,366 4,353 -
-Tax expenses 711,200 724,220 590 1,142
Unrealised loss on foreign exchange 43,542 14,475 -
-Write-back of provision for:
- CTS costs (793) - -
-- contract obligations and legal claims (22,093) (7,292) - -- site rectification and decommissioning works (2,636) (1,599) -
-- staff incentive scheme (40,820) (18,300) -
-4,318,699 4,512,767 (17,660) (22,038) The notes on pages 94 to 188 form part of these financial statements.
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 CASH FLOWS FROM OPERATING ACTIVITIES
(continued)
Payment for CTS costs 28 (18,576) (21,343) -
-Payment for contract obligations and legal claims 28 (8,004) (1,800) -
-Payment under staff incentive scheme 28 (38,569) (31,881) -
-Payments for site rectification and decommissioning works 28 (1,887) (1,619) -
-Operating cash flows before working capital changes 4,251,663 4,456,124 (17,660) (22,038) Changes in working capital:
Inventories 66,227 18,795 -
-Receivables (75,594) (90,350) 121 92
Payables 462,597 (198,213) 70 (75)
Related parties balances (1,861) (13,293) -
-Fellow subsidiaries balances (3,161) 5,293 -
-Penultimate holding company balances 43 144 36 (35)
Subsidiaries balances - - (5,716) 1,939
Cash flows from/(used in) operations 4,699,914 4,178,500 (23,149) (20,117)
Dividends received - - 1,985,000 2,104,000
Interest received 43,314 29,675 71,465 67,066
Tax paid (636,856) (731,257) (906) (1,656)
Net cash flows from operating activities 4,106,372 3,476,918 2,032,410 2,149,293
CASH FLOWS FROM INVESTING ACTIVITIES
Loan to a subsidiary - - - (150,000)
Loan repayment from a subsidiary - - 150,000 120,000
Purchase of intangible assets (257,960) (267,286) -
-Purchase of property, plant and equipment (978,370) (540,246) -
-Proceeds from disposal of property, plant and equipment 4,393 6,117 -
Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares pursuant to ESOS 18,485 16,628 18,485 16,628 Shares acquired pursuant to incentive arrangement (4,791) - -
-Drawdown of borrowing 2,150,000 500,000 2,150,000 500,000
Loans received from a subsidiary - - - 400,000
Repayment of loan from a related party - (4,185) -
-Repayment of borrowings (920,750) - (920,750)
-Repayment of lease financing (2,181) (2,060) -
-Payments of finance costs (390,645) (345,028) (402,533) (344,442) Ordinary share dividends paid (3,002,291) (3,000,640) (3,002,291) (3,000,640) Net cash flows used in financing activities (2,152,173) (2,835,285) (2,157,089) (2,428,454)
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 722,262 (159,782) 25,321 (309,161)
EFFECTS OF EXCHANGE RATE CHANGES 311 230 -
-CASH AND -CASH EQUIVALENTS AT THE
BEGINNING OF THE FINANCIAL YEAR 807,946 967,498 160,639 469,800
CASH AND CASH EQUIVALENTS AT THE END OF
THE FINANCIAL YEAR 27 1,530,519 807,946 185,960 160,639
The principal activity of the Company is investment holding, whilst the principal activities of the Group, comprising the Company and its subsidiaries, are the provision of mobile, fixed line and international gateway telecommunications services as well as Internet and broadband services, and corporate support functions for the Group. Details of the principal activities of the subsidiaries are shown in Note 18 to the financial statements.
There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year.
The Directors regard BGSM Equity Holdings Sdn. Bhd. as the immediate holding company, BGSM Management Sdn. Bhd. as the intermediate holding company, Maxis Communications Berhad (“MCB”) as the penultimate holding company and Binariang GSM Sdn. Bhd. (“BGSM”) as the ultimate holding company. All these companies are incorporated and domiciled in Malaysia.
The address of the registered office of business of the Company is as follows: Level 21, Menara Maxis
Kuala Lumpur City Centre Off Jalan Ampang 50088 Kuala Lumpur
The address of the principal place of business of the Company is as follows: Level 8, 10, 11, 14 - 25, Menara Maxis
Kuala Lumpur City Centre Off Jalan Ampang 50088 Kuala Lumpur
2 BASIS OF PREPARATION
The financial statements of the Group and of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention except as disclosed in the summary of significant accounting policies in Note 3 to the financial statements.
The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial year. It also requires Directors to exercise their judgment in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgments are based on the Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to the financial statements.
(a) Amendments to published standards and Issues Committee (“IC”) Interpretation to existing standard that are effective and applicable to the Group and the Company
The amendments to published standards and IC Interpretation to existing standard that are effective for the Group’s and the Company’s financial year beginning on or after 1 January 2014 are as follows:
• Amendments to MFRS 10, MFRS 12, MFRS 127 “Investment Entities”
• Amendments to MFRS 132 “Offsetting Financial Assets and Financial Liabilities”
• Amendments to MFRS 139 “Novation of Derivatives and Continuation of Hedge Accounting” • IC Interpretation 21 “Levies”
The adoption of the above amendments to published standards and IC Interpretation to existing standard did not have any significant effect on the consolidated and separate financial statements of the Group and the Company respectively upon their initial application.
(b) Standards and amendments to published standards that are applicable to the Group and the Company but not yet effective
A number of new standards and amendments to published standards are effective for annual periods beginning after 1 January 2014. None of these is expected to have a significant effect on the consolidated and separate financial statements of the Group and the Company respectively, except for standards set out below:
• MFRS 15 “Revenue from Contracts with Customers” (effective from 1 January 2017) deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a goods or service and thus has the ability to direct the use and obtain the benefits from the goods or service. The standard replaces MFRS 118 “Revenue” and MFRS 111 “Construction Contracts” and related interpretations. The Group and Company are currently assessing the impact of MFRS 15.
• MFRS 9 “Financial Instruments” (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments: Recognition and Measurement”. The complete version of MFRS 9 was issued in November 2014.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.
(b) Standards and amendments to published standards that are applicable to the Group and the Company but not yet effective (continued)
A number of new standards and amendments to published standards are effective for annual periods beginning after 1 January 2014. None of these is expected to have a significant effect on the consolidated and separate financial statements of the Group and the Company respectively, except for those standards set out below: (continued)
For financial liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in case where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Group and Company are currently assessing the impact of MFRS 9.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements.
There is no presentation for segmental reporting following the Group’s refinement of its operations and management reporting structure as disclosed in Note 5 to the financial statements.
(a) Basis of consolidation (i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
(a) Basis of consolidation (continued) (i) Subsidiaries (continued)
If the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date, any gains or losses arising from such re-measurement are recognised in the statement of profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 either in the statement of profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the statement of profit or loss. See accounting policy Note 3(d)(ii) on goodwill.
Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
All earnings and losses of the subsidiary are attributed to the parent and the non-controlling interests, even if the attribution of losses to the non-controlling interests results in a debit balance in the shareholders’ equity. Profit or loss attributable to non-controlling interests for prior years is not restated.
(ii) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(iii) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in the statement of profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the statement of profit or loss.
(b) Foreign currencies
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional and presentation currency.
When there is a change in an entity’s functional currency, the entity shall apply the translation procedures applicable to the new functional currency prospectively from the date of the change.
(ii) Transactions and balances
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities using the exchange rates prevailing at the date of the transactions.
Monetary assets and liabilities in foreign currencies at the reporting date are translated into the functional currency at exchange rates ruling at the date.
Exchange differences arising from the settlement of foreign currency transactions and the translation of monetary assets and liabilities denominated in foreign currencies at year end are recognised in the statement of profit or loss.
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
• income and expenses for each statement of profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is disposed of, exchange differences that were recorded in equity are recognised in the statement of profit or loss as part of the gain or loss on sale.
(b) Foreign currencies (continued) (iv) Closing rates
The principal closing rates used in translation of foreign currency amounts were as follows:
Foreign currencies 2014
RM
2013 RM
1 Singapore Dollar (“SGD”) 2.65 2.59
1 Special Drawing Rights (“SDR”)(1) 5.08 5.05
1 United States Dollar (“USD”) 3.50 3.28
Note:
(1) Represents the closing international accounting settlement rate with international carriers.
(c) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of property, plant and equipment. The cost of certain property, plant and equipment items include the costs of dismantling and removing the item and restoring the sites on which these items are located. These costs are due to obligations incurred either when the items were installed or as a consequence of having used these items during a particular period.
Certain telecommunications assets are stated at the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired. Included in telecommunications equipment are purchased computer software costs which are integral to such equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit or loss during the financial year in which they are incurred.
Freehold land is not depreciated as it has an indefinite life.
Leasehold lands and buildings held for own use are classified as operating or finance leases in the same way as leases of other assets.
(c) Property, plant and equipment (continued)
Long-term leasehold land is land with a remaining lease period exceeding 50 years. Leasehold land is amortised over the lease term on a straight line method, summarised as follows:
Long-term leasehold land 77 – 90 years
Short-term leasehold land 50 years
All property, plant and equipment are depreciated on the straight line method to write-off the cost of each category of assets to its residual value over its estimated useful life, summarised as follows:
Buildings 42 – 50 years
Telecommunications equipment 2 – 25 years
Submarine cables (included within telecommunications equipment) 10 – 25 years Site decommissioning works (included within telecommunications equipment) 15 years
Motor vehicles 5 years
Office furniture, fittings and equipment 3 – 7 years
Capital work-in-progress and capital inventories comprising mainly telecommunications equipment, submarine cables and renovations are not depreciated until they are ready for their intended use.
Residual values and useful lives are reassessed and adjusted, if appropriate, at each reporting date.
At each reporting date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(g)(i) on impairment of non-financial assets.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the statement of profit or loss.
(d) Intangible assets
The Group acquires intangible assets either as part of a business combination or through separate acquisition. Intangible assets acquired in a business combination are recorded at their fair value at the date of acquisition and recognised separately from goodwill. On initial acquisition, management judgment is applied to determine the appropriate allocation of purchase consideration to the assets being acquired, including goodwill and identifiable intangible assets.
(d) Intangible assets (continued) (i) Spectrum rights
The Group’s spectrum rights consist of telecommunications licences with allocated spectrum rights which were acquired as part of a business combination and other spectrum rights. Spectrum rights that are considered to have an indefinite economic useful life are not amortised but tested for impairment on an annual basis, and where an indication of impairment exists. Spectrum rights that are considered to have a finite life are amortised on a straight line basis over the period of expected benefit and assessed at each reporting date whether there is any indication of impairment exists.
See accounting policy Note 3(g)(i) on impairment of non-financial assets. The estimated useful lives of the spectrum rights of the Group are as follows:
Telecommunications licences with allocated spectrum rights Indefinite life
Other spectrum rights 4 years
Management assesses the indefinite economic useful life assumption applied to the acquired intangible assets annually.
(ii) Goodwill
Goodwill arises on the acquisition of subsidiaries and it represents the excess of the aggregation of the consideration transferred for purchase of subsidiaries or businesses, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previously held equity interest in the acquiree over the fair value of the net identifiable assets acquired.
Goodwill is measured at cost less any accumulated impairment losses. Negative goodwill is recognised immediately in the statement of profit or loss.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (“CGUs”) for the purpose of impairment testing and is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. See accounting policy Note 3(g)(i) on impairment of non-financial assets. Each CGU or a group of CGUs represents the lowest level within the Group at which goodwill is monitored for internal management purposes and which is expected to benefit from the synergies of the combination.
(iii) Customer acquisition costs
Expenditures incurred in providing the customer a free or subsidised device including installation costs, provided the customer signs a non-cancellable contract for a predetermined contractual period of one to two years, are capitalised as intangible assets and amortised over the contractual period on a straight line method. Customer acquisition costs are assessed at each reporting date whether there is any indication that the customer acquisition costs may be impaired. See accounting policy Note 3(g)(i) on impairment of non-financial assets.
(e) Investments in subsidiaries
In the Company’s separate financial statements, investments in subsidiaries are stated at cost plus the fair value of share options granted and shares acquired, over the Company’s equity instruments for employees (including full-time executive directors) of the subsidiaries during the vesting period, deemed as capital contribution. See accounting policy Note 3(t)(iv) on share-based compensation benefits. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(g)(i) on impairment of non-financial assets.
(f) Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.
A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.
(i) Classification and measurement Financial assets
The Group and the Company classify their financial assets in the following categories: at fair value through profit or loss, held-to-maturity, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition.
The Group and the Company do not hold any financial assets carried at fair value through profit or loss (except for derivatives that are designated as effective hedging instruments) and held-to-maturity. See accounting policy Note 3(h) on derivative financial instruments and hedging activities.
Financial assets are classified as current assets; except for maturities greater than 12 months after the reporting date, in which case they are classified as non-current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets in this category are initially recognised at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method. Changes in the carrying value of these assets are recognised in the statement of profit or loss.
(f) Financial instruments (continued)
(i) Classification and measurement (continued) Financial assets (continued)
Available-for-sale
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Financial assets in this category are initially recognised at fair value plus transaction costs and subsequently, at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments, interest and dividends are recognised in the statement of profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to the statement of profit or loss as a reclassification adjustment when the financial asset is derecognised.
Investments in equity instruments for which the fair value cannot be reliably measured are recognised at cost less impairment loss.
The Group’s available-for-sale financial asset comprises investment in unquoted shares.
Financial liabilities
The Group and the Company classify their financial liabilities in the following categories: at fair value through profit or loss, other financial liabilities and financial guarantee contracts. Management determines the classification of financial liabilities at initial recognition.
The Group and the Company do not hold any financial liabilities carried at fair value through profit or loss (except for derivatives that are designated as effective hedging instruments) and financial guarantee contracts. See accounting policy Note 3(h) on derivative financial instruments and hedging activities.
Other financial liabilities are non-derivative financial liabilities. Other financial liabilities are initially recognised at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method. Changes in the carrying value of these liabilities are recognised in the statement of profit or loss.
The Group’s and the Company’s other financial liabilities comprise payables (including inter-companies and related parties balances) and borrowings in the statement of financial position. Financial liabilities are classified as current liabilities; except for maturities greater than 12 months after the reporting date, in which case they are classified as non-current liabilities.
(ii) Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised when the Group and the Company become party to the contractual provisions of the instrument.
(f) Financial instruments (continued)
(iii) Derecognition of financial assets and financial liabilities
Financial assets are derecognised when the risks and rewards relating to the financial assets have expired or have been fully transferred or have been partially transferred with no control over the same.
Financial liabilities are derecognised when the liability is either discharged, cancelled, has expired or has been restructured with substantially different terms.
(iv) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.
(g) Impairment of assets (i) Non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that have a finite economic useful life are subject to amortisation and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Any impairment loss is charged to the statement of profit or loss. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the statement of profit or loss to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised.
(ii) Financial assets
Financial assets carried at amortised cost
Financial assets are impaired when there is objective evidence as a result of one or more events that the present value of estimated discounted future cash flows is lower than the carrying value. Any impairment losses are recognised immediately in the statement of profit or loss.
(g) Impairment of assets (continued) (ii) Financial assets (continued)
Financial assets carried at amortised cost (continued)
Financial assets are continuously monitored and allowances applied against financial assets consist of both specific impairments and collective impairments based on the Group’s and the Company’s historical loss experiences for the relevant aged category and taking into account general economic conditions. Historical loss experience allowances are calculated by line of business in order to reflect the specific nature of the financial assets relevant to that line of business.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the statement of profit or loss.
Financial assets classified as available-for-sale
Significant or prolonged decline in fair value below cost and significant financial difficulties of the issuer or obligor are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the statement of profit or loss, is reclassified from equity to the statement of profit or loss. Impairment losses in the statement of profit or loss on available-for-sale equity investments are not reversed through the statement of profit or loss in the subsequent period. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income.
(h) Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group and the Company designate and document at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group and the Company assess both at hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items and apply hedge accounting only where effectiveness tests are met on both a prospective and retrospective basis. The fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(h) Derivative financial instruments and hedging activities (continued) Cash flow hedge
The Group and the Company use cash flow hedges to mitigate the risk of variability of future cash flows attributable to foreign currency and/or interest rate fluctuations over the hedging period on the Group’s and the Company’s borrowings. Where a cash flow hedge qualifies for hedge accounting, the effective portion of gains and losses on remeasuring the fair value of the hedging instrument is recognised in other comprehensive income and accumulated in equity in the cash flow hedging reserve until such time as the hedged items affect profit or loss, then the gains or losses are reclassified to the statement of profit or loss. Gains or losses on any portion of the hedge determined to be ineffective are recognised immediately in the statement of profit or loss. The application of hedge accounting will create some volatility in equity reserve balances.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gains or losses existing in equity at that time remain in equity and are recognised when the forecast transaction is ultimately recognised in the statement of profit or loss. Where a forecast transaction is no longer expected to occur, the cumulative gains or losses that were reported in equity are immediately reclassified to the statement of profit or loss.
(i) Fair value estimates
The fair value of the financial assets, financial liabilities and derivative financial instruments is estimated for recognition and measurement or for disclosure purposes.
In assessing the fair value of financial instruments, the Group and the Company make certain assumptions and apply the estimated discounted value of future cash flows to determine the fair value of financial instruments. The fair values of financial assets and financial liabilities are estimated by discounting future cash flows at the current interest rate available to the respective companies. The face values for financial assets and financial liabilities with a maturity of less than one year are assumed to be approximately equal to their fair values.
For derivative financial instruments that are measured at fair value, the fair values are determined using a valuation technique which utilises data from recognised financial information sources. Assumptions are based on market conditions existing at each reporting date. The fair value is calculated as the present value of estimated future cash flow using an appropriate market-based yield curve.
(j) Inventories
Inventories, which comprise telecommunications components, incidentals and devices, are stated at the lower of cost and net realisable value. Cost includes the actual cost of materials and incidentals in bringing the inventories to their present location and condition, and is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(k) Receivables
Receivables are carried at invoice amount and/or income earned less an allowance for impairment. The allowance is established when there is objective evidence that the Group and the Company will not be able to collect all amounts due according to the original terms of receivables. When the debt becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised in the statement of profit or loss.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with licensed banks, other short-term, highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the statement of financial position. For the purposes of the statement of cash flows, cash and cash equivalents are presented net of pledged deposits.
(m) Share capital (i) Classification
Ordinary shares and redeemable preference shares with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity.
(ii) Share issue costs
External costs directly attributable to the issue of new shares are deducted, net of tax, against proceeds and shown in equity.
(iii) Dividends to shareholders of the Company
Dividend distribution to the Company’s shareholders is recognised as a liability in the period they are approved by the Board of Directors except for the final dividend which is subject to approval by the Company’s shareholders.
(n) Payables
Payables, including accruals, represent liabilities for goods received and services rendered to the Group and the Company prior to the end of the financial year and which remain unpaid. Payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
